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Developments in the Taxation of Corporate Profit in the OECD since 1965: Rates, Bases and Revenues

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  • Michael P Devereux

    ()
    (Oxford University Centre for Business Taxation, IFS, CEPR and CESifo)

Abstract

This paper describes developments in corporation taxes in the OECD over the last 40 years. It pays particular attention to the apparent divergence in the trends of the average statutory corporation tax rate and the average ratio of corporation tax revenues to GDP: the former has declined over time, while the latter has risen. It develops a simple framework for assessing the expected effect of the tax rate on tax revenues, and estimates the relationship using a panel of aggregate data for 20 OECD countries from 1965 to 2004, controlling for a measure of the tax base and other factors. There is only weak evidence of any relationship between the two. Evidence which does support a relationship is consistent with the finding of Clausing (2006) that the relationship is nonlinear, and that the implied revenue-maximising tax rate is likely to be low.

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Bibliographic Info

Paper provided by Oxford University Centre for Business Taxation in its series Working Papers with number 0704.

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Date of creation: 2007
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Handle: RePEc:btx:wpaper:0704

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References

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  1. Alan J. Auerbach & James M. Poterba, 1987. "Why Have Corporate Tax Revenues Declined?," NBER Chapters, in: Tax Policy and the Economy, Volume 1, pages 1-28 National Bureau of Economic Research, Inc.
  2. Slemrod, Joel, 2004. "Are corporate tax rates, or countries, converging?," Journal of Public Economics, Elsevier, vol. 88(6), pages 1169-1186, June.
  3. Devereux, Michael P & Griffith, Rachel, 2003. "Evaluating Tax Policy for Location Decisions," International Tax and Public Finance, Springer, vol. 10(2), pages 107-26, March.
  4. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR & CES & MSH, vol. 17(35), pages 449-495, October.
  5. Devereux, Michael P & Lockwood, Ben & Redoano, Michela, 2002. "Do Countries Compete Over Corporate Tax Rates?," The Warwick Economics Research Paper Series (TWERPS) 642, University of Warwick, Department of Economics.
  6. Michael P. Devereux & Alexander Klemm, 2003. "Measuring Taxes on Income from Capital: Evidence from the UK," CESifo Working Paper Series 968, CESifo Group Munich.
  7. Huizinga, Harry & Laeven, Luc, 2007. "International Profit Shifting within European Multinationals," CEPR Discussion Papers 6048, C.E.P.R. Discussion Papers.
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Cited by:
  1. Dwenger, Nadja & Steiner, Viktor, 2008. "Effective profit taxation and the elasticity of the corporate income tax base: Evidence from German corporate tax return data," arqus Discussion Papers in Quantitative Tax Research 57, arqus - Arbeitskreis Quantitative Steuerlehre.
  2. Rocha-Akis, Silvia & Riedl, Aleksandra, 2008. "Testing the tax competition theory: How elastic are national tax bases in Western Europe?," Working Papers 142, Oesterreichische Nationalbank (Austrian Central Bank).
  3. Zodrow, George R., 2010. "Capital Mobility And Capital Tax Competition," National Tax Journal, National Tax Association, vol. 63(4), pages 865-901, December .
  4. Simon Loretz, 2008. "Corporate taxation in the OECD in a wider context," Working Papers 0821, Oxford University Centre for Business Taxation.

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